By Murray Coleman

Economist Dennis Gartman and MBF Asset Management founder Mark Fisher are teaming up to make their popular tactical risk tracking benchmark into a pair of exchange-traded notes. Working with an asset management arm of Swiss banker UBS AG (UBS), the funds hold futures representing about 35 different securities. Those range from equities to commodities and currencies as well as various types of fixed-income.

While he agrees that levered ETFs do what they’re prospectuses say they’re supposed to accomplish, he believes “there’s still a lot of confusion around the whole group.”

“If there’s a way to come up with something that does what it’s advertised to do in a recognizable format, that would be well-greeted by investors,” Nusbaum added.

In the case of ONN and OFF, investors should see clearly what’s happening — and what’s not — with the ETNs. According to UBS, ONN’s value should rise when “the outlook” for markets and the broader economy is positive. When views are more negative, it should go the other way. Conversely, OFF’s supposed to move in the opposite direction.

Nusbaum pointed out that Gartman has an ETF in Canada that’s actively managed which has exposure to commodities, currencies, equities and fixed-income. “But it’s down nearly 17% year-to-date. And since its inception, which is about two years, it’s down around 14% while the S&P 500 had gained almost 13% in that same period,” he noted. “There might be some wrinkles in the way that fund’s designed, but it’s truly stunning how poorly it has performed.”

On a more positive note, Nusbaum points out that the methodologies underlying OFF and ONN don’t seem to overlap with the Canadian ETF. “Even if OFF and ONN are totally different products from the Canadian ETF, which they appear to be, I’d still like to see them in action for at least a few months before advising investors to dive in,” he added.

About Focus on Funds

As exchange-traded funds and other investing vehicles have ballooned in number, the task of figuring out what works well and what doesn’t has only gotten harder. Barrons.com’s Focus on Funds looks under the hood of ETFs, mutual funds and hedge funds for overlooked values, actionable ideas and the latest pitfalls for fund investors.

Chris Dieterich has covered the U.S. stock market for The Wall Street Journal and Dow Jones Newswires. He is a graduate of Regis University and the Missouri School of Journalism.